President’s weekend is in the bag and it’s time to start thinking about where spring may lead us on the equities side. Obviously we’ve had a good run here in the past few weeks, courtesy of simply following this rally higher and not attempting to step in front of what was clearly a speeding train. Successful trading doesn’t have to be complicated – more often than you think it’s best to turn off your brain and simply follow the trend. However, all that said – we are now heading into low oxygen altitudes and the odds are starting to learn toward at least a short term reversal.
If you are a long term subscriber then you may recall my CPCE Deluxe chart which has served us well over the years. A few weeks ago I pulled this one out of my bag and suggested that a meaningful reversal would probably not be anywhere near unless we got a touch of that diagonal support line. Well, depending on how you draw it we’re getting pretty close – and that suggests a medium term reversal is on the horizon – perhaps a week or two out.
From a purely statistical perspective it’s also worthwhile remembering that the E-Mini is now painting its 8th consecutive week higher (assuming it holds until Friday). To give you an idea of how rare this is statistically speaking: Since 1950 we only count nine instances in which we painted 7 consecutive weeks higher, and only seven instances of 8 consecutive higher weekly closes. The odds for a weekly reversal are currently near the 99 percentile, but that doesn’t mean it’s impossible we see a higher close. To put things into perspective – last week the odds for a reversal were ~ 98% but here we are!
Earlier this month I warned you about the Fed’s POMO auctions scheduled throughout February. We knew the odds of continuation higher were rather high but even given all that easy Fed cash I would be very cautious about the long side here until we see a little correction. It’s just too tempting to shake out some Johnny-come-latelies. Caveat Emptor!
Quick update on natgas – we grabbed a contract at the ST SMA breach this morning and it’s been chugging higher like a champ. I’d start scaling out a little at this point but am ready to keep a few contracts running into 3.32.
Bonds – the 30-year may be breaking off that diagonal resistance. If you are in this trade then be prepared for a test of that 25-day SMA.
USD/JPY – I’d like to put this one our map. It’s not a bonafide setup just yet but it’s worthwhile noting that it breached a daily NLBL for the first time in weeks. Maybe it’ll jump higher tomorrow – let’s see.
We’ve got nice setups today – let’s jump right in:
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This entry was posted on Tuesday, February 19th, 2013 at 2:10 pm. Both comments and pings are currently closed.